Business Case Studies & Business Publications

Donaldson, Lufkin & Jenrette, 1995 (B)

Bruner, Robert F.,...

Case

Donaldson, Lufkin & Jenrette, 1995 (B)

Bruner, Robert F.; Fordyce, Douglas

F-1146 | Published July 9, 1996 | 18 pages Case

Collection: Darden School of Business

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The B case (see also the A case, F-1145) describes the plan of the Equitable Companies to sell a 20 percent interest in Donaldson, Lufkin & Jenrette (DLJ) via an equity carve-out in an initial public offering (IPO), and presents students the task of pricing DLJ's shares in the IPO. The company approached the pricing task using the method of comparable multiples. The B case gives ample information on valuation multiples of peer firms. A key point of assessment is to choose which industry segment DLJ competes in so that an appropriate multiple may be chosen. The B case also describes the equity-underwriting process in detail. The teaching note explains how this case may be used to explore the trade-off between maximizing the offering price and supporting the trading of shares in the aftermarket. The A and B cases may be taught alone or together. Taught together, they would ordinarily require two class periods. The instructor may cover the general subject matter of the A and B cases by using the abridged version of both cases (F-1147).